[ OUR OPINION ]
Rough flight ahead
for United AirlinesDISRUPTIVE and painful as it will be, bankruptcy may be a necessary pill for the ailing United Airlines to swallow. Moreover, the process of its restructuring should stimulate other airlines to revise outmoded business practices to reflect a changed market in an industry critical to the health of the state's and the nation's economy.
THE ISSUE United Airlines is on the brink of bankruptcy after its request for a government loan guarantee is rejected.
Filing for bankruptcy protection appears unavoidable for the airline after a federal panel's rejection earlier this week of its application for a $1.8 billion loan guarantee. Although its action surprised industry observers, the Air Transportation Stabilization Board acted prudently in saying no to backing the airline with taxpayer money. Without alterations in its business model, the loan guarantee would have only temporarily stemmed United's flow of red ink and unfairly damaged competitors doing a better job of managing their business.
The effects of bankruptcy undoubtedly will ripple through the industry. Under court supervision, United would be able to renegotiate labor contracts, which had been among the most generous, doled out in the late 1990s when the industry was flush and flying high. United's rivals, who are also struggling in the stuttering national economy, may seize this opportunity to pressure their employees for cuts in wages and benefits.
ASSOCIATED PRESS
United Airlines jets were lined up at terminal C Thursday, at Chicago's O'Hare airport.
If United drops routes and capacity, other carriers may step in to claim those passengers, but none can afford to stretch too far; most of the larger airlines are operating on slim margins themselves. Travelers may see ticket prices go up as competition declines, and fewer options for flights as less profitable circuits are eliminated. However, the presence of discount airlines, such as Southwest and JetBlue, and smaller regional carriers eager for customers may keep these in check.
Hawaii's tourism economy may feel some heat. United, the world's second-largest airline, brings about 5,000 visitors to the islands on an average of 20 flights a day. Its 84,000 employees -- 1,576 based in Hawaii -- who own 55 percent of the company face uncertain times.
United's troubles preceded Sept. 11, but the terrorist attacks made things worse. Estimates placed the carrier's losses at as much as $8 million a day. It failed to win adequate concessions from its workers, which damaged its position to gain the loan guarantee. Indeed, in rejecting the airline's bid, the board noted that United's recovery plan had not adjusted to the current market environment and would not have achieved financial stability.
Bankruptcy is an unsettling and desperate venture. Even if the airline emerges successfully from bankruptcy, it likely will take many years. However, as important as the airline industry is to the national economy, federal assistance for United was not warranted. It would have simply delayed the airline's facing up to the grim facts of poor business practices.
BACK TO TOP
Published by Oahu Publications Inc., a subsidiary of Black Press.Don Kendall, Publisher
Frank Bridgewater, Editor 529-4791; fbridgewater@starbulletin.com
Michael Rovner, Assistant Editor 529-4768; mrovner@starbulletin.com
Lucy Young-Oda, Assistant Editor 529-4762; lyoungoda@starbulletin.comMary Poole, Editorial Page Editor, 529-4748; mpoole@starbulletin.com
The Honolulu Star-Bulletin (USPS 249460) is published daily by
John Flanagan, Contributing Editor 294-3533; jflanagan@starbulletin.com
Oahu Publications at 500 Ala Moana Blvd., Suite 7-500, Honolulu, Hawaii 96813.
Periodicals postage paid at Honolulu, Hawaii. Postmaster: Send address changes to
Star-Bulletin, P.O. Box 3080, Honolulu, Hawaii 96802.
